NEW ZEALAND: VIEW: Kiwibank Expects Inflation To Return To Target In Q3
Kiwibank is expecting Q1 CPI to print 0.2pp above consensus at 0.8% q/q and 4.2% y/y. It believes that higher imported inflation will result in inflation being above RBNZ February expectation, but domestic inflation should continue to ease. It expects inflation to return to the target band in Q3 with the first rate cut unlikely to follow until the first meeting post the data which will be November 27.
- Kiwibank says that “a downside surprise would be warmly welcome. However, stronger imported inflation than the RBNZ expects will likely see headline print above 4%. Nonetheless, more important for monetary policy is domestic inflation. And the worst is over. We expect an easing in domestic inflation to 5.4%yoy, from 5.9%.”
- “While all eyes will zero in on the headline print, the underlying trend is perhaps more important. Core inflation – removing volatile prices – appears to have peaked in late 2022, and currently sits at 4.1%. We expect the downtrend to continue. But it’s still a long way back to target.”
- “Inflation will continue to fall from here, but risks to the RBNZ’s forecasts are tilted to the upside, in turn delaying the start-date of rate cuts. Indeed, we will likely see bets for rate cuts as early as August pared back and pricing pushed out should the official number print above the RBNZ’s 3.8%. The Kiwi should also receive a boost following an upside surprise.”
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Historical bullets
JGB TECHS: (M4) Trend Signals Remain Bullish
- RES 3: 149.53 - High Mar 22 (cont) and a key resistance
- RES 2: 148.74 - High Jul 24 (cont)
- RES 1: 147.74 - High Jan 15 and bull trigger
- PRICE: 145.13 @ 15:40 GMT Mar 15
- SUP 1: 144.60 - Low Dec 08 and 11 (cont)
- SUP 2: 143.44 - Low Oct 31 (cont)
- SUP 3: 143.29 - 2.618 proj of the Mar 22 - Apr 18 - May 12 swing
Recent weakness in JGBs resulted in a low print of 144.90 on Friday. A stronger reversal higher is required to signal the end of the recent corrective phase. The bull trigger has been defined at 147.74, the mid-January high. A break would resume the uptrend. Moving average studies remain in a bull-mode set-up, highlighting an uptrend. For bears, a resumption of weakness would potentially open the 144.60 support.
USDCAD TECHS: Remains Above The Mar 8 Low
- RES 4: 1.3729 76.4% retracement of the Nov 1 - Dec 27 bear leg
- RES 3: 1.3661 High Nov 27
- RES 2: 1.3623 61.8% retracement of the Nov 1 - Dec 27 bear leg
- RES 1: 1.3606 High Feb 28 and the bull trigger
- PRICE: 1.3532 @ 16:18 GMT Mar 15
- SUP 1: 1.3420 Low Mar 8
- SUP 2: 1.3359 Low Jan 31 and key S/T support
- SUP 3: 1.3343 Low Jan 12
- SUP 4: 1.3288 Low Jan 5
USDCAD short-term conditions remain bearish, however, a continuation of the latest recovery would undermine this theme and expose key resistance and the bull trigger at 1.3606, the Feb 28 high. Clearance of this level would confirm a resumption of the uptrend that has been in place since December 27. For bears, a move below 1.3420, the Mar 8 low, would resume bearish activity and open 1.3359, the Jan 31 low.
AUDUSD TECHS: Pierces Support At The 50-Day EMA
- RES 4: 0.6748 High Jan 5
- RES 3: 0.6729 High Jan 12
- RES 2: 0.6708 61.8% retracement of the Dec 28 - Feb 13 bear cycle
- RES 1: 0.6668 High Mar 8 and the bull trigger
- PRICE: 0.6567 @ 16:16 GMT Mar 15
- SUP 1: 0.6552 Low Mar 15
- SUP 2: 0.6478/6443 Low Mar 5 / Low Feb 13 and the bear trigger
- SUP 3: 0.6412 76.4% Fibonacci retracement for Oct - Dec upleg
- SUP 4: 0.6360 Low Nov 14
The latest pullback in AUDUSD appears to be a correction. The pair has pierced support around the 50-day EMA - at 0.6572. A clear break of this average would signal scope for a deeper pullback towards the next key support at 0.6478, the Mar 5 low. On the upside, clearance of resistance at 0.6668, the Mar 8 high, is required to resume the bull cycle and open 0.6708, a Fibonacci retracement.
